Donald Trump has indicated he would be open to repealing the $10,000 cap on the SALT deduction. This cap was set during his presidency in 2017. This cap places a significant limit on the amount filers can deduct for all state and local taxes, including income and property taxes. For what it’s worth, Trump is actively campaigning for re-election. He’s promised to “restore SALT,” which is code for allowing tax relief for wealthy earners if he ever regains the presidency.
The negative effects of the SALT cap have been harsh, especially in high income, high property tax states. Single filers can currently deduct up to $10,000 in state and local taxes under the law as it stands. The same applies to married couples filing jointly. We assume the 2025 standard deduction will be $15,000 for singles and $30,000 for marrieds. As a practical matter, close to 90% of taxpayers take the standard deduction. They lose out on favorable treatment from highly regressively-structured itemized deductions such as SALT.
In general, higher earners tend to pay higher shares in both state income and property taxes. If the SALT cap is fully repealed, households earning $430,000 or more would receive nearly three-quarters of the benefit from such a change. From the initial $10,000 SALT deduction cap level, the House proposal would double this limit specifically for married non-head-of-household filers. This modification would overwhelmingly favor households making more than $200,000 annually.
Twelve Republican lawmakers have introduced the SALT Repeal and Limit Reduction Act of 2023 to lower SALT cap from $10K to $250K. The Urban-Brookings Tax Policy Center and the Tax Policy Center have analyzed how these changes could benefit taxpayers, especially those in wealthier brackets.
Trying to interpret what this means for tax policy should Trump be somehow re-elected is impossible to know. The TCJA of 2017 doubled the standard deduction. Beginning in 2018, this deduction has been indexed for inflation. This change does little to address the concerns of people harmed by the SALT cap.
Perhaps most surprising is the geographic distribution of affected taxpayers. Forty of the top fifty U.S. congressional districts impacted by the SALT cap are in democratic strongholds like California, Illinois, New Jersey, and New York. One major reason is their high property values and property tax rate. As a blow to so many of the New Jersey residents, it probably hits the hardest.
Garrett Watson of the Tax Foundation rightly noted that context is necessary in these conversations.
“It all has to come together in the context of the broader package.” – Garrett Watson
As Trump discusses his tax plans on the campaign trail, it remains to be seen how these proposals will be received by both voters and lawmakers. The proposed repeal or modification of the SALT cap would be even more consequential in reshaping tax policy. This amendment will disproportionately help high-income households.